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Is South Korea Socialist?

It was shaping up as a good spring for the vocal minority in South Korea. Actors shaved their heads and marched against a plan to allow more Hollywood movies into the country. Bank employees in red headbands and sky-blue shirts banged sticks in unison outside the nation's oldest bank, Chohung, to protest its "fraudulent" sale to private owners. Farmers blocked Seoul traffic with tractors to stop a free-trade deal with Chile. Truckers, teachers, railroad employees and factory workers went on strike, and so on. Labor histrionics are nothing new here, but under new President Roh Moo Hyun, the unions were starting to win these battles. Then, last week, Roh sent the police to break up a new railroad strike without even offering to negotiate.

The sudden decision to get tough appears to be driven by criticism that capitalist South Korea was tilting toward "socialism." Roh took office in February as the first president whose inner circle is staffed by the "386 generation"—Koreans in their 30s who were born in the 1960s and grew up amid the massive protests against military rule in the 1980s. Roh himself is a former human-rights lawyer who, before last week, had declined to roll out riot police against strikers, as his predecessors did. His young lieutenants openly defend the interests of workers over their bosses and soft European ideals over hard American models of capitalism. Their rise to power inspired the spring strikes, and it's not clear just when the mood in the presidential Blue House started to turn. But last month, amid rising economic losses, the Chinese ambassador to Seoul remarked that Koreans now tell him their country "is more socialist than China."

Many Koreans were shocked to hear that from a representative of the largest socialist state. After all, South Korea's last president was also an ex-activist, but Kim Dae Jung and his aides were older, and won praise as leading free-market reformers after the Asian financial crisis of 1997-98. Roh is now earning a quite different reputation—as a leading backslider—and his administration is clearly sensitive on this point. Citing Seoul's vow to open its theaters to Hollywood, Deputy Finance and Economy Minister Kwon Tae Shin warns, "If we break our promise, our hard-won credibility will disappear again."

However Roh is labeled, until last week a pattern was becoming clear. Unions would protest, and the Blue House would "mediate" with results that favored labor. A strike at Doosan Heavy Industries ended only after Roh aides urged management to meet labor demands. They also helped truckers gain higher pay with state subsidies. And when Roh hinted he might not press his plan to privatize Chohung bank, unions went on strike to scuttle the plan for good. Rhee Namuh, CEO of Rhee Capital Advisors in Seoul, says "the socialist factor of the new administration" encouraged unions to "act tougher."

All the while, losses were mounting. The Chohung strike crippled its 500 branches, and frightened customers withdrew $2.5 billion, or 7 percent of total deposits, on day one, forcing an emergency cash infusion from the central bank the next day. The trucker's strike shut down cargo traffic for nearly two weeks. As economic growth slowed in the first quarter, business leaders warned that they might move operations out of South Korea if the unrest continued.

South Korea's trade partners were getting fed up, too. The nation's first-ever bilateral free-trade deal was conceived as a complementary swap—Chilean fruit for Korean technology—but has been blocked by fears of its impact on Korean grape growers, derailing a landmark deal to defend a niche lobby. Because of the movie-industry opposition, Washington is reluctant to sign an investment treaty with Seoul that would deliver $3 billion in new U.S. investment in coming years.

At home, the battle has shaped up as a war between generations. Older, conservative critics compare Roh's aides to the young Red Guards of China's Cultural Revolution, though a more apt comparison is to politically correct Westerners: archdefenders of any downtrodden minority facing pressure from globalization. Before moving against the railroad workers last week, Roh warned that parts of the labor movement were growing irresponsible, even immoral. Perhaps, at 56, he's finally beginning to sound his age.